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IHS Global Insight
February 16, 2017
In Brief
365 words
LG Chem to extend Chinese battery plant despite uncertainty over government policy - report
Jamal Amir

South Korean electric vehicle (EV) battery manufacturer LG Chem plans to expand its plant in China, despite facing some policy constraints in the local market of late, according to a report by BusinessKorea. The South Korean company is planning to build two additional plants for automotive batteries and small batteries at its Nanjing factory in China, and is reportedly in the process of choosing a contractor for the construction project. It is estimated that the new construction will require an investment of around KRW39.8 billion (USD35 million), according to the report. The company, however, is not expected to build additional production lines immediately.

Significance:South Korean battery manufacturers such as LG Chem are facing tough times in China because of trade restrictions between the two countries. So strong are the sanctions that the Chinese government has made all the electric cars fitted with South Korean batteries non-eligible for EV subsidies. In January, the Chinese government released a list of vehicles eligible for EV subsidies in the country; the list did not have names of cars with batteries from LG Chem and Samsung SDI (seeChina: 25 January 2017:). Even Hyundai has delayed the launch of its Sonata plug-in hybrid EV (PHEV) in China by almost a year as it is looking to replace the battery from a South Korean maker to a locally produced one (seeChina: 10 February 2017:). In fact, both companies are yet to obtain certification from the government for operating in China. They were denied certification last year in June (seeChina - South Korea: 22 June 2016:). One of the reasons for continued expansion by LG Chem in China could be that the country is the biggest market in the world for EVs and it is expected to continue to grow, and the company is hoping to hit the ground running if and when the restrictions are lifted. LG Chem has previously said that it expected between 30% and 60% growth in its EV battery business in 2017, mostly on the back of the Chinese market. Currently, the Nanjing plant, which is spread over an area of 25,000 square metres, can produce batteries for 50,000 EVs and 180,000 PHEVs per year, according to BusinessKorea.
February 16, 2017
      
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